Sunday, November 27, 2022

Venezuela’s Petro Cryptocurrency Is Actually a Thing… but What Kind of Thing?

Venezuela’s Petro Cryptocurrency Is Actually a Thing… but What Kind of Thing?

The Venezuelan government has begun a chaotic pre-sale campaign for its national “crypto-asset”, the petro (PTR). However there are several caveats for investors seeking profits or even novelty value from the world’s first government-backed cryptocurrency — pre-sale tokens are not themselves petros, exactly what and where the tokens are is unclear, and U.S. investors may potentially violate their own country’s economic sanctions by participating.

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White Paper, Website and TV Launch

Surprising many who never took the idea seriously, the Bolivarian Republic of Venezuela published a draft white paper for the petro and launched a website for companies and individuals to register interest. One report from the launch livestream said it had raised the equivalent of 4.7 billion yuan (or 735 million USD) from the pre-sale.

President Nicolas Maduro announced the pre-sale in a national television address, on stage with cryptocurrency mining machine props.

The white paper notes that the tokens sold at pre-sale are actually assets on the NEM blockchain and not the tokens that will function on the Petro network. However they may be exchanged for petro tokens proper once the initial coin offering launches. There was reportedly some confusion over the “last-minute switch” to NEM from Ethereum, however, and uncertainty over who controls the addresses (more on that below).

Petro buyform
Get your petros here

A total 100 million petros will be created, and the paper claims the government may not create any more. Each petro is divisible, like bitcoin, into 100 million units (called “Mene”). Venezuela will also accept national tax payments in PTR and appears willing to allow it to run alongside — or even supplant — its existing fiat currency, the bolivar.

Novelty or Serious Currency?

Venezuela has made history not only as the first country to launch a blockchain-based digital currency, but to also refer to it officially as an ICO.

Venezuela Petro logoThe site listed the government’s numerous reasons for launching its own cryptocurrency, which include:

  • ostensibly handing monetary sovereignty back to the country and its citizenry;
  • promote development, infrastructure and training of young people in electronic mining, coding, cryptography, network security and economics 4.0;
  • turning the country into a blockchain-based solutions development hub for emerging economies;
  • enable “direct trade” and “financial and economic independence” — likely euphemisms for routing around U.S. led trade sanctions.

The website added:

“The Petro has been created in an innovative manner, using the highest standards in block chain technology and information security, thinking of a future where electronic asset-representations will enable more direct trade as well as government work within the framework of true financial and economic independence.”

Separate to the pre-sale, the initial offering of actual petro tokens (whatever form they take) will happen at a later date. The white paper doesn’t do a great job of defining the difference between pre-sale and actual tokens, but says 82,400,000 will be sold.

The 17.6 percent of tokens not market for public sale “will be retained by the Venezuelan Superintendency of Currency and Related Activities (SUPCACVEN)”.

55 percent of funds raised by the sales (note that’s in currencies other than the petro itself) will go to a “sovereign fund”, and the rest shared between various petro technical and ecosystem development projects.

Still a Lot We Don’t Know About the Petro

Venezuelan software developer and writer Alejandro Machado posted a scathing 20-tweet critique of the petro pre-sale launch, calling it “extremely confusing” and suggesting there was no way to verify where the tokens lived or indeed if any had sold at all.

The switch from Ethereum ERC-20 tokens to NEM Mosaics was last-minute, he wrote, and there was still an Ethereum-based PTR token trading which appeared to fit the original white paper distribution specifications. He also pointed to confusion over which assets were officially “petros” and which weren’t:

“There’s a single NEM address that holds 100 million “ve:ptr”, plus 38.4 million “petro:presale” tokens and (mysteriously) 78.6 million “petro:presale_transfer”. Who owns this address?”

Switching blockchain platforms at the last minute before launch is unlikely to create much investor confidence. However the Venezuelan government may not care about that, since it claims the PTR’s value is determined by the price of Venezuela’s oil, calculated daily using this formula:

Venezuela petro value calculation

Besides, a truly useful crypto-asset’s value is decided by the open market, which may do with the PTR what it has done with the bolivar in the past couple of years — that is, render it practically worthless. One bolivar is today worth roughly $0.000040 USD.

Having a cryptocurrency whose value is determined by government policy, and is not traded freely, defeats the purpose of using the technology in the first place.

Who Else Is Involved?

Others have raised questions over the involvement of Chinese mining hardware manufacturer LightningASIC, which previously posted statements supporting the petro initiative, and invited followers to join the official petro Telegram group.

At press time, however, that Telegram group was light on detail regarding the launch, and appeared mostly full of comments criticizing the petro and Venezuela’s socialist government in general.

The U.S. Treasury Department stated last month that American investors could be in violation of international sanctions if they participated in the petro token sale.

What do you think? Is the petro for real, or not? Let’s hear your thoughts in the comments.

Images via Reuters, Venezuelan government 

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